Wall Street equities traded soft, having seen fresh record highs on Monday amid a lack of fresh catalysts for the complex in today’s session because the focus was shifting back onto Fed speak on Wednesday, with the FOMC meeting Minutes release, ahead of remarks due from Fed Chair Jerome Powell on Thursday, speaking at an IMF panel. Market participants will be looking at how many FOMC policymakers argue for inflationary pressures to be notable in 2022 and 2023. The Minutes will likely convey that the threshold is exceptionally high for inflation data in 2021 to spur any monetary policy action.
The NYSE FANG+ ETF, an index that provides market exposure to highly liquid companies from major US Stock Exchanges, rallied, as did the momentum style factor. Recent price action has been reminding us recently that much of the momentum factor will be dominated by value names rather than mid-April growth names, which have dominated the playbook previously. The US reopening narrative remains strong, although the recent pick up in US cases has spurred cautious commentary from health officials. Still, California Governor Newsom announced California would end nearly all COVID-19 business limitations on June 15th, 2021, if vaccine supply is sufficient and hospitalization rates are stable.
Asian equity markets traded soft as the regional bourses failed to sustain the momentum from their counterparts in New York as Nikkei 225 closed down -1.1%. The session was clouded by a mixed FX price action and disappointing Household Spending data, which contracted by 6.6% Y/Y. Market participants will be focusing on whether there will be more stimulus to bolster the economic rebound the government has given no firm commitment on additional spending measures. The Mainland equities traded subdued after the PBoC reduced liquidity amid reports China has asked banks to reduce credit until year-end, while Hong Kong markets remained closed for the holiday.
